Handback & Expiry: PFI/PPP

With the first PPP/PFI Projects already expiring, we have first-hand experience of the process, and the lessons learnt which could help you navigate around some of the more contentious issues:

PFI Centre of Excellence: We act for several SPVs, sponsors and asset managers on a large number of PFI health projects (including acute and community hospitals) where the public sector are being encouraged by the PFI Centre of Excellence and the Department of Health and Social Care to manage asset compliance issues ahead of handback. We have advised on various complex contractual issues relating to asset condition and contract compliance, undertaking condition surveys, arrangements for rectification works to take place within set time periods in operational facilities and penalties and procedures to manage and mitigate risk for all parties.

PFI Hospital Expiry: We are currently advising a NHS Trust in the North West of England on preparation for the expiry of a hospital PFI project, including advice on the carrying out of surveys to be jointly procured by both parties and dealing with the repercussions of such advice.

PFI Waste Facilities Expiry: We are currently advising: (a) the SPV on the expiry of an English waste PFI project, including advising on innovative solutions to prolong the term of the underlying contract for the benefit of both parties; and (b) an English waste authority on the expiry of their waste PFI project and the procurement of a replacement solution

UK Highways M40 Limited: We are currently advising the SPV on the M40 PFI. Our role extends to representing the sponsors on a range of contractual issues relating to handback of the project as it enters its final five-year operational period. The immediate role relates to the handling of the five-year handback survey and the introduction of standby letters of credit to replace retention deductions. We are also advising on potential handback condition, penalties and procedures to manage and mitigate risk.

Stockport Meadows: We are currently engaged on behalf of Stockport NHS Foundation Trust in relation to the expiry of The Meadows, a specialist mental health facility providing both inpatient and outpatient services. The facility is due to expire in 2024; the project agreement does not follow NHS standard form. The Trust has a number of options to consider to ensure service continuity and achieve ongoing value for money coupled with quality of service for patients. Collaborating with consultants we have been working through options assessing all aspects (technical, financial and legal) as well as the wider strategic objectives of the Trust for the facility. There is a shortage of beds in this space, meaning this facility is in high demand so it is important that the transition is handled effectively.

We have significant experience of working on PFI terminations across a range of sectors:

Royal Liverpool & Broadgreen NHS Foundation Trust: We acted for the Trust from project inception throughout the aftermath of Carillion’s insolvency. The Trust's objective was completion of the construction of the hospital – in negotiations that were made complex due to the number of competing interests, including HM Government. The negotiated termination required the amendment, termination and novation of project contracts and drafting of complex settlement agreements.

Northumbria Healthcare NHS Foundation Trust: We advised on the consensual termination of its PFI contract for Hexham General Hospital. This transaction was the first termination by an NHS Trust and was financed using a £114m loan from the local authority to pay the private contractor who built and operated the hospital. This transaction was classed as "novel, contentious and/or repercussive" and as such required HM Treasury consent.

Lancashire Care NHS Foundation Trust: We advised on the termination of the PPP status i.e. partnership arrangement on a voluntary basis following the reputational damage caused by the PPP partners involvement in the Grenfell disaster.

Resource Recovery Solutions (Derbyshire) Limited (RRS) – Energy from Waste: A 27-year PPP contract involving the design, build and financing of a 190,000 tonne pa Mechanical Biological Treatment and Gasification Facility. The project also included the management, operation, and maintenance of nine Household Waste Recycling Centres, the management of Council and third party owned transfer stations and the transportation of residual waste, its treatment and disposal. Over two years, we advised RRS in relation to its strategy to secure completion and long-term viability of the Energy from Waste plant, maintaining the support of lenders, the local authorities and other stakeholders. We advised on various claims and counterclaims between RRS and its EPC Contractor, whose financial status was under significant scrutiny against the backdrop of the issues with Carillion, and on issues with its operating contractor. We also provided advice on contingency planning in relation to potential steps funders and the local authority may take. We successfully protected RRS' position to the extent possible in the difficult situations it faced, ensuring the directors were fully aware of the pros and cons of the various options available to it, bearing in mind the risks and liabilities of the company, and its obligations not only under the complex PPP documents, but also under insolvency law. 

Cheshire West and Chester Council (CWAC): We advised CWAC on the early termination of its 12-year waste collection contract, and arrangements for the transition of the service to a new company wholly owned by CWAC. Following a number of claims made by the contractor, and some performance issues, we provided a full assurance review of the contract terms and then helped CWAC to develop a strategy to deal with the claims and negotiate early termination, once a decision was made to seek to bring the service back in-house. We advised on the early termination documentation and development of the detailed handback plan. This included analysis on the issues arising from transition and how these would fit in with the existing contract and the future proposals for service delivery – recognising the need for a seamless handover.